JDS Uniphase Poised to Gain from Strong Product Line-up - Analyst Blog

On Dec 5, we issued an updated research report on JDS Uniphase Corp. (JDSU). The results were well supported by an improved spending atmosphere and increased strategic investment by carriers and enterprise customers. 

 

JDS Uniphase delivered positive earnings surprises in the last four quarters, with an average beat of 43.16%. The company also reported better financial results in the first quarter of fiscal 2015 with both the top and the bottom line outpacing the Zacks Consensus Estimate. 

 

A strong product line-up coupled with the acquisition of Trendium, Network Instruments and Arieso are likely to act as tailwinds going forward. Moreover, higher Internet usage and associated applications have spurred demand for components and modules used in 3G/4G high-speed communication networks, likely to benefit JDS Uniphase in the long run.

 

Recently, JDS Uniphase teamed up with a leading manufacturer of machine tools for metal fabrication – Amada – to build a new direct diode laser (DDL) that will offer up to 2 kilowatts of output power. The company has also developed its Location Insight Services (LIS), which will open up significant sales opportunities for large mobile operators.

 

Despite witnessing an increase in revenues, the company continues to report losses. Moreover, the Network Enablement segment's revenues declined 8.5% year over year while Optical Communications revenues within the Products segment dropped 5.2%. Further, the overall book-to-bill ratio was less than 1 in the reported quarter. 

 

The ongoing global economic fluctuations may significantly affect the prospects of JDS Uniphase. Moreover, the consolidation trend of wireless networks and data centers will aggravate the situation. The optical component industry is highly cyclical in nature and is characterized by extreme price volatility. In addition, a weaker-than-expected market recovery will affect the situation.

 

JDS Uniphase currently carries a Zacks Rank #3 (Hold).

 

Stocks That Warrant a Look

 

Other better-ranked stocks that belong to the sector include ClearOne, Inc. (CLRO), Gigamon Inc. (GIMO) and Vocera Communications, Inc. (VCRA). All stocks have Zacks Rank #2 (Buy).